A Preferred Provider Organization, or PPO, is a type of managed care health insurance plan. These types of plans are more flexible than plans like HMOs, since they offer some coverage for out-of-network providers. But they still offer the best benefits if you see a doctor or other provider who is in the PPO’s network. Other benefits of PPOs are that you don’t need to choose a primary care physician (PCP), and typically do not need a referral from your primary care physician to see any specialists.
PPO plans were developed to provide members with greater flexibility than other plans. While offering some of the cost-saving benefits of other plans (such as having a network of doctors). The combination of lower prices and more flexibility makes PPO plans a popular choice.
How PPOs Work
With PPOs, in-network providers, or participating network doctors, nurses, and healthcare facilities, collaborate with your PPO to offer plan members healthcare at a predetermined discounted rate.
PPOs operate by using something called cost-sharing. That means, once you meet your plan’s annual deductible, you’ll pay a portion of the bill for the care you receive from in-network providers.
The most important things to know about PPOs when deciding if one is right for you include:
- Going in-network saves you money – Your health insurance carrier will encourage you to seek care within the plan’s network, so you’ll pay a lot less in out-of-pocket expenses for doing so.
- You get more freedom – PPOs are different from other types of plans because they allow you the freedom to manage your own care, since you will not have to get referrals to see specialists.
- You’ll still need pre-authorization – While you don’t need a referral to visit a specialist, PPO plans frequently require prior authorization for specific treatments, medications, or procedures. You could need your insurance company’s consent before beginning a treatment plan or having surgery, unless it’s an emergency.
- Not everything will be covered – Your PPO will usually want to know why you require the test, service, or treatment when you or your doctor apply for pre-authorization. The PPO has the right to deny your claim if it doesn’t have the prior authorization it needs. It’s essential to read the fine print of your policy to see whether prior authorization is required before receiving specific medical services.
- You get more flexibility for more money – You might pay more in premiums with a PPO than you would with another type of plan, but you’ll also have more flexibility and choice. PPO networks often include multiple options for providers that are spread across numerous cities and states.
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The Cost of a PPO
In exchange for the flexibility to choose your providers and the ability to go out-of-network for care, PPO premiums tend to be higher than those of other plans. As with all plans, the premiums are based on your age, location, and number of dependents on the plan.
For example, monthly premiums for PPOs cost on average:
- 21-year-old – Single $404, couple $807, couple with 1 child $1,113
- 30-year-old – Single $458, couple $916, couple with 1 child $1,222
- 40-year-old – Single $516, couple $1,032, couple with 1 child $1,528
- 50-year-old – Single $721, couple $1,442, couple with 1 child $1,748
Another expense to think about is your annual deductible. This is the amount you have to pay for your care before your PPO plan will begin to pay their portion of your medical bills. The deductibles for PPO plans can be higher than those of other plans. Generally, deductibles for a PPO are around $1,500 for the year. And you will have to meet that amount each calendar year.
If your PPO plan offers an office visit copay benefit, you will only pay one small set fee (your copay) when you see a doctor in your preferred network. If your PPO plan doesn’t offer a copay benefit, the cost of your visit will be charged at the agreed-upon preferred network rate and applied to your deductible.
Going “out-of-network” (or receiving medical care from a doctor or facility outside the preferred network) will result in higher costs for you. Additionally, you might need to pay the doctor directly before submitting a claim for reimbursement to the PPO.
One thing to note is that PPO plans have two out-of-pocket limits. So, you will not have to pay more than a set amount for your care in one calendar year. One limit applies to costs for care within the network, and the other covers both in- and out-of-network costs. If you require a lot of care or pricey procedures, these limits may protect you from excessive expenses.
For example, the in-network limits for the 2022 plan year were $9,100 for individuals and $18,200 for families. For 2021, it was $8,550 and $17,100 respectively. That means in 2022, if you paid over $9,100 in out-of-pocket medical expenses, your insurance would have fully covered any medical expenses after you hit that amount.
Types Of PPO Plans
There are two types of PPOs, which differ based on the size of the geographical coverage area. There are local PPO plans that cover a smaller region, such as a county or a part of a county. These generally have between 2,000 and 5,000 providers in their networks.
The other type is a regional PPO plan. A regional PPO has a contracted network with around 16,000 to 17,000 providers that can cover the entire region or multiple regions. This includes both urban and rural areas.
PPO Pros and Cons
Knowing the advantages and disadvantages of PPOs can help you decide if one might be right for you. PPOs have a number of benefits that make receiving care simple. On the other hand, though, you also need to think about the drawbacks. They can make receiving care a little more expensive with a PPO plan.
- No PCP requirement – You are not required to select just one primary care provider. This is especially convenient if you travel frequently and can’t see the same doctor every time you have an appointment. Other types of insurance plans often require you to choose a PCP when you enroll.
- Flexibility – PPOs offer a wide variety of premium, copay, and deductible amounts, allowing you to find a plan that truly meets your financial and medical requirements.
- No referral requirement – You don’t need to see your PCP to get a referral for specialty care. This means you can simply schedule an appointment to get a screening if you feel you need to. Without having to first make an appointment with your PCP.
- Coverage isn’t limited – Although there is still a preferred network, you have some coverage for services outside of that network. Choosing out-of-network care does cost a bit more, but other types of plans don’t cover it at all.
- Larger network – You have a lot of control over where you receive care because PPO plans give you access to a wider network of physicians and hospitals. The in-network cost is the same for every doctor and hospital in your insurance company’s network.
- Higher premiums – You pay more to have the flexibility PPOs offer.
- Higher out-of-pocket costs – Cost-sharing leaves you responsible for more of your bill than with other plans.
- Higher deductibles – You’ll have an annual deductible with a PPO plan, which is the amount you’ll need to pay out-of-pocket before your insurance starts paying anything. Other plans sometimes have lower or no deductibles.
- Filing claims – If you receive out-of-network care, you are in charge of submitting the claim paperwork on your own. If you’re not used to the procedure, this might be challenging or confusing. Especially if you’re seeing multiple doctors at once, if you’re managing a chronic medical condition, for example.
Choosing Your PPO Plan
To find the best plan for you, you have to find the right balance between the level of coverage you need and the cost of the premiums. If you want more control over your decisions and are willing to pay extra for it, a PPO is an excellent choice. If you travel frequently, having this type of plan would be extremely useful. Because you wouldn’t need to see a primary care doctor before seeing a doctor in your area.
The health insurance you choose significantly affects the cost and quality of your medical care. This is why the first step for you and your family is understanding all of your health insurance options. Including their benefits and drawbacks.
PPOs may be more expensive than other healthcare plans, but the higher cost is offset by better network benefits. In terms of the doctors, hospitals, and other healthcare providers, a PPO will typically give you the most freedom. However, the monthly premiums will generally be more expensive than those of other plans. A PPO may or may not make sense for you. Depending on your circumstances, including your medical requirements and how frequently you travel outside of your local area.